Western Canadian feeder cattle were $2 higher to $2 lower per hundredweight (cwt) on average last week. Eastern Saskatchewan and Manitoba values appeared to be following the U.S. feeder markets, which were down $3-$6/cwt relative to seven days earlier.
Demand for grass cattle was evident on the lighter weight categories, but replacement cattle over 700 pounds struggled to move higher. Despite the negative feedlot margins, prices for yearlings have held value which is somewhat surprising.
Lethbridge-area feedlots reported red Angus steers weighing just under 700 lbs. were $142/cwt landed in the feedlot; Charolais-cross steers weighing 800 lbs. were $128/cwt; Charolais-cross heifers at 800 lbs. were $119/cwt. Buying interest for heifers appeared to be more aggressive this week with feedlot operators working to bring down input costs.
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For the first quarter of 2013, exports for feeder cattle and calves to the U.S. were 82,000 head, which is up 65 per cent over 2012 for the same timeframe. Given the larger export pace, we are seeing the U.S. feeder market have more influence in Manitoba and Saskatchewan prices. Therefore, the rebound in corn prices, along with weakness in the U.S. fed cattle market, set a negative tone on the eastern region of the Prairies.
Consumer at-home food spending has actually experienced a year-over-year decline, which has stemmed the tide for beef and cattle prices. While retail beef prices are 10 to 15 per cent higher than last year, consumer spending on food products for home has decreased. Therefore, we see other inflationary factors driving up prices on the retail level as wholesale beef values continue to trade at similar values as in 2012.
Given the firm feedgrain prices, feeder cattle need to experience a lift from the fed market in order to improve feeding margins. Given the fact that the June live cattle futures are trading at a discount to the April contract, look for feeder cattle to trade sideways to slightly lower over the next couple of weeks.
I think light-weight cattle under 500 lbs. are reasonably priced, given the price projection for fed cattle in the fourth quarter. These pee-wee calves will also have the bulk of the weight gain with feedgrains that will be at least $40 per tonne below current levels.
